So here’s a question that anyone who has worked with pawn shops before might think is a little odd, but if you’ve never been in a pawn shop or aren’t sure what it is that they do – this is a perfectly reasonable question.
What was asked was whether or not pawn shops give out loans.
The simple question to that answer is yes, of course they do.
Pawn shops exist almost entirely for that reason. They serve as an asset to the community that they are in to help their customers through particularly rough moments of financial hardship.
Of course, there are other things that pawn shops do, such as buy and sell merchandise for instance, but the primary core of their day-to-day operations is working with people who want to make short term cash loans and use their items or possessions as collateral to secure that loan.
The loans that pawn shops make are called pawn loans, and when you make a pawn loan, you will end up getting cash right on the spot for whatever the loan amount was for.
So if you borrowed $500 against your ring let’s just say, you are going to walk out of the pawn shop with $500 cash in your hand to use to pay whatever bills or other expenses that you have going on at that moment.
Do The Loans Pawn Shops Offer Cost A Lot
No, typically speaking a pawn loan is one of the most affordable forms of short term financing that you will find available.
It’s vastly more affordable than payday loans, cash advances, or other ‘consumer loans’ in most cases.
That having been said, there is a slight drawback to pawn loans in that you do have to have the merchandise to secure the loan to begin with. So if you need to borrow $500, you need to have something that is probably pretty easy to resell for $750 or $1,000.
If that seems odd, you have to understand that pawn shops typically loan about 40-60% of the current resale value of an item. You don’t get the full 100% because there’s no way for a pawn shop to know exactly how much they can resell an item for.
Additionally, there are costs associated with reselling merchandise, and those costs have to be made up for someplace – typically in the difference between what they think they can sell an item for and how much they are willing to loan you on it.
How Safe Are The Loans The Pawn Shops Give Out
Pawn loans are extremely safe as far as the variety of consumer financing options that are available to you if you need to get your hands on a little emergency money for something that has come up.
First of all, pawn loans are no-recourse loans. What that means is that if you can’t afford to pay it back and end up defaulting on the loan, the pawn shop can’t turn around and sue you later. There’s no legal risk involved with these types of loans.
Additionally, pawn loans are ‘secured loans.’ They are backed up by the merchandise that you brought in to the pawn shop to begin with, so if you default on the loan, it’s not as if anything is going to go against your credit report or anything like that. You will end up forfeiting whatever you took in, but you aren’t going to have a black mark on your record for the next 7 years!
Additionally, pawn shops are exceptional at organization and when your stuff is in on loan, it will be perfectly safe and there will be nothing to worry about. It will be there waiting for you when you’re ready to get it back, just like you left it.
Do Pawn Shops Offer Different Types Of Loans
Well, as you now know, pawn shops offer what are known as pawn loans – which are the most cost effective, inexpensive, and easy to get short-term cash loan option for most people.
But that having been said, as we mentioned, sometimes people don’t have the merchandise required to secure a loan that will cover whatever expenses that they have to meet.
In these cases, occasionally pawn shops will also offer a variety of third part financing options, a lot like some check cashing stores will.
Now, these are by no means the ‘bread-and-butter’ of their operations, and in my opinion, aren’t the preferred form of financing, but when you need more than you can borrow from a pawn loan – it’s certainly one option that you can take to get you out of a jam.
That’s actually why pawn shops even offer them to begin with. It’s simply another service just to help their customers out of whatever problem that they may be in and get them the loan they need, when they need it.